Rand vulnerable at start of week

Trade report 24/03/2014

ZAR outlook

USD/ZAR expected range: 10.7300 – 10.8800

The ZAR has started the week in steady trade against the USD, but with concerns over a slowdown in growth in China the currency is looking vulnerable. The performance of the Rand last week is important to note as it was the worst week for the ZAR since January.  The ZAR was trading at R10.8890/USD at 08:19 this morning, slightly improved from its close in New York on Friday of R10.9100/USD.

Local news

The main forecasted news on the local front for the week is the SARB’s announcement of its policy decision.  Despite the banks reluctance to increase interest rates due to consumer debt it will need to come across in a hawkish light, to prevent further lack of interest in the ZAR by foreign investors.  Economists are leaning towards the opinion that we may see another small interest rate hike, maybe even a smaller 25bp margin which would help maintain the SARB’s credibility going forward.

International news

Poor preliminary HSBC manufacturing PMI out of China has caused many emerging market currency's reliant on the economic giant for trade, to soften as the PMI data for March fell to an eight month low.  The hawkish approach by the US Fed in its latest policy meeting has also had EMs on the backfoot.  PMI Data released earlier today has shown that growth in Germany, the Eurozones largest economy, has improved at its slowest rate in 4 months.  This has caused the EUR to soften vs the GBP.

TODAYS KEY DATA POINTS (GMT):

• 01:45 CN HSBC manufacturing PMI (preliminary)
• 08:30 DE Markit/BME manufacturing PMI (preliminary)
• 09:00 EZ Markit composite PMI (preliminary)
• 09:00 EZ Markit/BME manufacturing PMI (preliminary)
• 09:00 EZ Markit services PMI (preliminary)
• 12:30 US Chicago Fed activity index
• 13:45 US Markit manufacturing PMI (preliminary)

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